Brewin’ For A Boomin’

Earlier I wrote about how similar this period is to the 1970’s and Nixon-Ford-Carter years in office. And how, within a few years of Carter, we underwent perhaps the greatest economic expansion in history. Before that, I wrote how the various crises of our times were encouraging. Because crises typically lead to reforms. And reforms are good for us.

Now to the stock market. It looks a lot like the market from 1967 to 1982. In those years the market went nowhere. (January 1967 – Dow was 786. January 1982 it was 875.) Meanwhile, pressures grew.

Sure, it went up a hundred points. And down a hundred points. But for years when it rose it hit a ceiling. When it fell it hit a floor. And so the ups and downs were contained within the ceiling and the floor. The market did not break beyond them. So after many years of ups and downs the market was no further ahead than where it stood many years before.

This also looks a lot like the market from 1931 to 1947. (January 1931 – Dow was 170. January 1947 it was 170.) Again, lots of ups and downs. Between ceiling and floor. But after many years the market was no higher than it had been at the start.

And that is where our market is today. (January 2000 – Dow at 11,700. As I write this, Dow at 11,850.)

Now for the interesting part. After doldrums, the market roared. After 1947 the market rose 447 percent. That was huge. It created fortunes for investors. After 1982 the market rose 1300 percent. That is not a typo. If you had $10,000 invested broadly in stocks in 1982 you would have seen it grow to $130,000 by 2000.

Such booms occur everywhere. Pressures build, until boom! We get reform. Temperature rises. The fever breaks. We get the storm after the calm. The civil rights movement bursts upon us. Or we get a revolution following political pressures. Or the dam breaks from the buildup of water. Or after subterranean pressures build, the big earthquake strikes. Indeed, our earth and beyond came from the Big Boom.

Pressures are building in the market. Capital is accumulating on the sidelines. Trillions of dollars of it. Profits are growing. The old liberal order in society here and in Europe is creaking. A lot of socialism there is going bust. The ancient tax system here shows signs of bursting apart. To give way to something simpler. Our big benefits programs must be changed. Because we don’t have the money to pay for them. Reforms are in the air.

Yes, we have turmoil. The turmoil we witness is mostly the old forces sniffing the changes that waft in that air. They don’t want the changes that loom. Example: Public service unions rail against cuts in their benefits. Benefits taxpayers cannot afford. The unions pour millions into efforts to prop up the old order. To plug leaks in the dam.

Meanwhile, the market stews and brews. My guess is that at some point it will break out. My further guess is that it will not be the floor it breaks through, but the ceiling.

From Tom ... as in Morgan.

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